EU – Baltic States, Financial Services, Latvia, Loan

Einars Repse.

He said that the currently planned budget amendments are good grounds for talks with international lenders about raising the budget deficit level, writes BNS.

Repse said that by cutting budget expenses by 40% and reducing 13.5% of expenses the government did not plan to reduce earlier, and finding additional 81.5 million lats (EUR 115.96 mln), the budget deficit would reach 7% of the gross domestic product (GDP).

"It is a very high deficit, but it could be explained with out economy being in the downturn at present, and, when preparing the budget, we did not have enough time for structural reforms," said Repse, voicing hopes that the government's good work would be the basis for further talks.

"Of course, if talks do not succeed, and we should always take such a possibility into account, we should be ready to survive on our own. We are considering also such a variant. There will be no catastrophe, we will manage it, but, of course, it will be more difficult, and more radical reforms will be needed," said Repse.

The international financial institutions, including the International Monetary Fund (IMF) and the European Commission, which have put together a 7.5 billion euros financial aid package for Latvia insist that the Baltic state should keep its national budget deficit as low as possible. The government has so far promised to achieve a 5% deficit.